STIFEL 2026 HEALTHCARE CONFERENCE - BILLIONTOONE INC

Financial Performance:

• Oncology business reached $68 million in annualized revenue in Q3, excluding response Medicare coverage.
• Average sales representative efficiency exceeds $1 million in revenue, even while a significant portion of the 65-person sales force is still ramping up.
• Company is currently profitable with double-digit EBITDA margins, contrasting with peers like Guardant Health and Natera that remain unprofitable.
• Long-term goal is for individual product lines to achieve 30%+ operating margins, though company-wide margins may be suppressed by heavy investment in new market expansion.
• Target gross margins for each new product line are 70-80% or higher.

Guidance and Future Outlook:

• Oncology growth strategy focuses on maintaining ~100% year-over-year test volume growth without sacrificing service quality.
• Sales force expansion is planned at 5-6 reps per quarter in 2026, potentially increasing to 7-8 reps per quarter in 2027 to sustain growth rates as the revenue base increases.
• Expect meaningful volume uplifts from health system penetration to begin in Q1/Q2 of 2027, following the integration with Epic Aura.
• Anticipate that health system wins (projected at 1-5 per year, up from 1 in 2026 and 3 in 2025) will drive substantial additive growth, with each win adding 3,000-4,000 tests per quarter.
• Management anticipates the 60% of the prenatal market residing in health systems will be a primary growth driver, though the exact timing and magnitude of these wins remain difficult to model precisely.

Business Segments and Product Lines:

• Oncology:
  • Two core commercial products: Northstar Select (therapy selection) and Northstar Response (response monitoring).
  • Northstar Select demonstrates >50% higher sensitivity in detecting actionable therapies compared to incumbents in peer-reviewed studies.
  • Northstar Response uses epigenetic changes rather than variants to monitor tumor burden, allowing for earlier detection of progression and tumor evolution than variant-based tests.
  • Head-to-head data shows the tissue-free Response assay performs on par with or better than widely used tumor-informed assays in colorectal cancer.
  • MolDx coverage decision for tissue-free response monitoring is expected to be finalized in 2027 following pan-cancer comparative data submission.
• Prenatal:
  • Commercial reach includes ~40% in single-specialty clinics and 60% in health systems.
  • In-network status has improved to ~90%, enabling access to managed Medicaid and health system contracts previously out of reach.
  • Expanded product portfolio now includes a 130-gene panel to satisfy genetic counselors and serve the "rare conditions" segment within health systems.
  • Full integration with Epic Aura achieved by Q2 2026, facilitating streamlined ordering and adoption in new health systems.

Market and Competitive Landscape:

• Liquid biopsy market is crowded with larger competitors; Billion to One competes via superior product performance (sensitivity and workflow) rather than marketing spend or first-mover advantage.
• Competitor Natera launched a fetal focus assay; management notes their test relies on partner testing (linked synapse) and is less performant without it, whereas Billion to One's test remains robust without partner testing.
• Analysis of top 10 accounts over two years shows no shift in competitor win/loss ratios, indicating the primary barrier is health system inertia rather than competitor product superiority.
• Independent clinic market penetration is at ~40%; growth potential there is slowing as the company moves up the S-curve, shifting strategic focus to the larger, slower-moving health system sector.

Risks and Challenges:

• Service quality risks if sales force expansion outpaces the operational capacity to maintain fast turnaround times (e.g., avoiding 3-week waits that deter oncologists).
• Health system adoption involves long sales cycles (6-12 months) due to complex phases including cybersecurity reviews, phlebotomy agreements, and vendor approvals.
• Reimbursement risks remain in the prenatal sector, specifically regarding managed Medicaid and out-of-network status, though in-network progress mitigates this.
• Competitive inertia in large health systems makes switching providers difficult, even with superior clinical data.

Management Commentary and Tone:

• CEO Oguzhan Atay expressed high confidence in the company's "product-led" growth strategy, asserting that superior clinical differentiation (e.g., 50% sensitivity advantage) drives clinician advocacy and adoption.
• Tone is confident regarding execution capabilities, citing the rapid Epic Aura integration speed compared to other labs.
• Management emphasizes a disciplined approach to capital allocation, accepting lower company-wide margins in the short term to fund growth into large markets with long-term margin maturation.
• CEO remains deeply involved in sales, noting they have conducted nearly daily calls with customers and rarely hear competitor names, suggesting strong frontline market traction.

Analyst Questions and Answers:

• Q: How to compete in a crowded liquid biopsy market? A: By proving superior performance (sensitivity) and ease of use, leading to clinical adoption rather than relying on marketing spend.
• Q: What differentiates the Response assay? A: It tracks epigenetic changes across the epigenome rather than specific variants, capturing tumor evolution and detecting progression before tissue-informed tests.
• Q: Sales force size and efficiency? A: Currently 65 reps; on track for mid-50s to 65 target. Each rep generates >$1M annualized revenue; future hiring targets 5-6/quarter to maintain 100% growth.
• Q: Progress on in-network status and health systems? A: 90% in-network; 60% of prenatal market is in health systems previously untapped. 1-3 wins in 2025, 1 in 2026; 2027 expects significant upside from these large accounts.
• Q: Impact of Natera's new fetal focus assay? A: Changes the conversation but not the outcome; Billion to One's assay works better without partner testing and has more clinical evidence for RHD and IPT.
• Q: Status of MolDx decision? A: Decision likely 2027; company provided pan-cancer head-to-head evidence against a tumor-informed assay to overcome the "tissue-free vs. tumor-informed" skepticism.
• Q: Future margin trajectory? A: Expect individual products to hit 30%+ operating margins; company-wide margins may not increase significantly immediately due to continued heavy investment, but profitability is a strategic "must-have."

Other Key Points:

• The company has successfully expanded its prenatal portfolio to include the 130-gene panel specifically to capture the needs of genetic counselors within health systems.
• Sales efficiency is so high that adding more reps is not the primary growth lever; rather, maintaining service quality while scaling volume is the constraint.
• The "inertia" of health systems is identified as the single biggest hurdle, taking 6-12 months to switch vendors even after clinical committee approval.